Dow Climbs 12.73 to New High as Market Shows Its Resilience
The stock market survived a double jolt of bad news Friday, closing with another record high in what professionals called an impressive demonstration of its resilience.
After giving up as much as 18 points from Thursday’s record close early in the day, the Dow Jones industrial average recovered and finished with a 12.73-point gain to close at a record 1,613.42.
“This has to be viewed as an extremely impressive showing,” said Newton Zinder, chief market analyst for E. F. Hutton & Co.
Among other indexes showing substantial gains after faltering earlier in the day were the Dow Jones transportation average, which gained 5.70 points to close at a record 762.35; the New York Stock Exchange composite index, which rose 0.57 to close at a record 123.71, and the American Stock Exchange composite index, which gained 1.86 to close at 245.57--still well below a record because of its heavy weighting toward the suffering energy industry.
The Wilshire index of 5,000 equities closed at 2,214.030, up 9.775.
Large blocks of 10,000 or more shares traded on the NYSE totaled 2,754, compared to 2,913 on Thursday.
Gaining issues outpaced losers by a margin of about three to two on the New York Stock Exchange, where volume totaled 144.4 million shares, compared to 146.1 million on Thursday.
The market opened Friday on the heels of the Commerce Department’s report that the civilian non-farm unemployment rate had dropped to 6.75% in January from 6.9% in December. While that was a signal of a particularly strong economy, the statistic had been expected to be bearish because such strong growth should discourage the Federal Reserve from dropping interest rates further.
Later in the day, a special three-judge federal court in Washington declared unconstitutional a key provision of the Gramm-Rudman deficit reduction law. Stock market analysts had expected a sharp sell-off on that news, for the market has been sensitive in the past to indications that Congress and the Administration could come to grips with the federal budget deficit.
The market reacted to both developments as expected, registering an 18-point drop in the Dow. But, within an hour, the average was rising again.
“Today I had one money manager tell me that if Gramm-Rudman was found unconstitutional, the market would drop 200 points,” remarked Robert Nurock, publisher of a Paoli, Pa.-based market newsletter called the Astute Investor. “But Gramm-Rudman is largely symbolic. It reflects Washington’s consciousness that the public wants it to work on the deficit, and that consciousness is still there.”
Nurock said that, the unemployment figures notwithstanding, the market has an abundance of statistics suggesting that the economy is still sluggish--among them figures showing that business borrowings are still falling.
“Until you see signs that business is borrowing again to build up inventory,” he said, “the economy won’t pick up steam.”
Market analysts do see indications that a cyclical recovery will emerge toward the end of this year, including strength over the last few sessions in what are known as “cyclical” stocks, such as those in the aluminum, chemical and paper industries.
Showing strength in Friday’s market were technology stocks, which benefit from economic upswings as well as the decline in the value of the dollar against foreign currencies. In that sector, International Business Machines gained 2 1/8 to close at 155 7/8 and Texas Instruments gained 5 to close at 122 5/8.
Oil stocks also gained, as oil prices firmed for the second day. Exxon, for example, gained 5/8 to close at $50 1/8; Arco gained 3/4 to close at 52 1/8, and Pennzoil gained 2 to close at 64 3/8.
Early in the day in the credit markets, bond prices skidded and interest rates shot up in reaction to the employment figures for January. The sell-off intensified about midway through the session after the federal court ruling on Gramm-Rudman.
Bond Losses Trimmed
But, as the session progressed, prices recovered and finished well above the low levels of the day. The Treasury’s benchmark 30-year bond wound up the session off 3/8 point after having been down earlier by a full point, or $10 for each $1,000 in face amount.
In the secondary market for Treasury securities, prices of short-term governments lost 1/8 point to 7/32 point on the day, intermediate maturities fell from 5/32 point to 3/8 point and long-term issues slid 3/8 point to 3/4 point, according to the investment firm of Salomon Bros.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, moved down 0.30 from late Thursday to 110.63. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 2.50 to 1,160.25.
In corporate trading, utilities fell 3/4 point in light trading and industrials were off 3/4 point in moderate activity.
